As property management professionals, we keep track of the real estate market, even though we deal primarily in rental homes. We follow the market because what happens with buying and selling impacts renting. Case in point: A recent study from RealtyTrac revealed that housing affordability – how easy it is to purchase and afford a home for most Americans – is declining throughout the nation. Specifically, the report analyzed 1,194 counties throughout the U.S. and found that a third went above their historical averages for affordability – meaning homes in those counties were becoming more expensive to buy. Homes have been extremely affordable over the past seven years, ever since the market crash, but the balance is starting to tip back towards the other end of the spectrum. There are several causes behind this phenomenon. The first is that home prices are rising. In June, the median sales price went up by 2.38 percent from May of this year in Birmingham alone. This has been the trend for the past couple of years, and it shows no signs of stopping. The second cause is rising interest rates. Gone are the days of historically low interest rates. Now, rates are hovering between 4.3 and 4.4 percent for a 30-year fixed-rate mortgage. Rates have climbed by more than a percentage point over the last couple of years, which has contributed to the cost of buying a home – and probably pushed more than a few potential buyers out of the market. When put together, interest rates and higher prices have put downward pressure on housing affordability – which has had the effect of driving more would-be buyers towards renting, and has kept plenty of tenants who have thought about buying as renters for the foreseeable future. Property owners are the ones who are benefiting from this trend in affordability. They can convert their homes into rental properties and tap into the demand for single-family rental homes, and develop positive cash flow from their property.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.